The Federal Government, through the Federal Inland Revenue Service (FIRS), is conclusing plans to increase Value Added Tax (VAT).
VAT, which now five per cent, is undergoing review, after which it may attract between 35 and 50 per cent increase.
The Executive Chairman of the Federal Inland Revenue Service (FIRS), Babatunde Fowler, disclosed this on Tuesday during a meeting with the Senate Committee on Finance on the Medium Term Expenditure and Fiscal Strategy Framework (MTEF).
“Nigerians should be ready for an increase in VAT before the end of the year. VAT is higher in other countries, including Ghana and many others. There should be an increase in rate but not immediately,” Fowler said.
Fowler explained that VAT collection rose by about 20 per cent last year, but that many companies still withhold VAT without remitting same to government coffers.
Fowler told the committee that the government’s revenue projection from taxes for the 2019 fiscal year is N8 trillion, out of which N3 trillion is expected from VAT.
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Fowler said: “By the end of this year, we should be ready for increase in VAT. A lot of Nigerians travel to Ghana and other West African countries and they can see that theirs is much higher. And they pay when they go for those trips. We should be ready for an increase on VAT.
“I can certainly see an increase in VAT of at least 35 percent to 50 per cent this year based on our enforcement activities. There certainly will be an increase in Company Income Tax (CIT) and also on Petroleum Profit Tax (PPT).”
On the new minimum wage, Budget & National Planning Minister Udo Udoma said: “Let me speak on the issue of the minimum wage.
However, financial experts have cautioned the government so that the reason for raising the VAT will not be counter productive.
A former Executive Director at Keystone Bank, Richard Obire, noted that raising VAT just to pay salary will not add any value to the economy, arguing that the people are better managers of funds than the government.
According to Obire, VAT should be exempted on products that affect the poor as it will make them poorer and worsen their economic conditions with increased prices of goods and services.
Also speaking, Chief Operating Officer, GTI Capital, Kehinde Hassan said: “The proposal to increase VAT may be equated to a counterproductive move. The just approved N30,000 minimum wage is a far cry from a standard remuneration package that can guarantee minimum standard of living in Nigeria. Increasing VAT rate to enhance non-oil revenue generation is synonymous to spicing a favourite delicacy with digestive pills.
The Chief Executive Officer, Sofunix Investment and Communication, Sola Oni said: “The N30,000 minimum wage has been endorsed by the senate after protracted argument between the organized labour and the federal government . However, the proposed plan by the FIRS to increase Value Added Tax (VAT) is like carrot and stick. There is no doubt that VAT is more transparent to charge and it reduces tax evasion.”
“It is an indirect way of taxing the new minimum wage in real term. Workers are consumers of products and services. Hence, part of their new minimum wage shall go for VAT,” he opined.